“I am concerned. After a long period of above-target
inflation there are very obvious risks in the MPC suggesting
that it isn’t taking the inflation target seriously. I’m not
saying my colleagues who voted for asset purchases don’t take
the inflation target seriously, but we do need to be very aware
of the possible impact of providing extra support now on
people’s expectations.”

On inflation expectations:

“In bond markets there is some evidence of upward creep in
inflation expectations. What has worked the other way round
recently is that wages have been extremely stable. If you look
at regular wages, average weekly earnings, there’s been no
growth at all since April. I think that essentially is
unprecedented, certainly over the post war years. So we need to
think more about that, but that is from the inflation point of
view a favourable sign.”

“It’s the recent history of inflation that makes me more
concerned about further policy easing.”

“The history matters and it influences me very strongly. I
would be surprised if the history of the last five years has had
no impact.”

“I can see why inflation expectations should be starting
to rise. Indeed, given where inflation has been over the last
five years, you might say the bigger surprise is that that
didn’t happen sooner.”

“What we have working against that are the expected
movements in administered and regulated prices. But looking at
the transactions in the markets that have a direct bearing on
inflation, I would say that if anything there has been something
of an improvement recently.”

“Wage pressures seem to be less than one might have
expected.”

On the recent decline in commodity prices and inflation:

“I mentioned the favourable signal from wages, and the
other favourable signal very recently has been the news on
commodity prices. Those certainly make me feel that there’s more
room for maneuver than there would have been if they hadn’t
happened.”

“Inevitably if the underlying inflationary pressures look
weaker, then the case for stimulus becomes stronger. I know that
we aren’t thinking about the very short term, and we’ve been
quite right to say that, but at the same time when you have
these underlying concerns about inflation expectations and
inflation history, favorable news on the short term does ease my
longer-term concerns.”

On the pound and inflation:

The pound’s recent decline “would be very surprising if it
didn’t lead to some further upward growth in prices. That’s one
of the things we have taken into account. Certainly last year I
didn’t realise quite the role that the rise of the pound was
playing in creating a more favourable inflation outlook. Since
then, all that’s happened is that that’s been unwound, but
that’s taken us back to where we would have been had there never
been this rise.”

On more targeted policy measures:

“The minutes did say that the committee saw some merit in
thinking more about the FLS and I think that’s absolutely right.
It’s entirely right we should be looking at the various
instruments available to us and what they can do and then
deciding on the appropriate use of those different instruments.
It’s very clear things have moved a long way from the so-called
conventional position that monetary policy is changing the
interest rate.”

“To the extent that we feel there are measures available
to us to ease credit problems, there is obviously a case for
them and we need to think about the impact of those relative to
the impact of more asset purchases.”

“It’s not necessarily a question of one or the other. If
you think of the sort of credit-easing policies, they aren’t
something that you do one month and then decide to do a bit more
of the next month. They’re more part of the background.”

“Are there further things that could be thought of that
might seem desirable in some circumstances? I’m sure there are,
but at the same time the point I’d make is that, at least with
the current committee, as you saw from the last minutes, we have
been discussing whether we want to provide extra stimulus and
the people who were voting against I don’t think they were
voting against because they thought it didn’t work. I think they
were voting against because they thought it wouldn’t be a good
idea.”

On amending the Funding for Lending Scheme now:

“I’m keeping an open mind on it at the moment. As I say
the inflation position, at least from my perspective, has
improved somewhat. The other point you need to remember about
the FLS it has in large part, because of its existence, led to
much improved access to market funding by the banks, so it’s
playing more of a role of backstop now than as an essential
source of funding.”

On first-quarter GDP data:

“There is enough of a margin of uncertainty for me not to
be surprised” if there was a “minor contraction. There’s
certainly a risk of that.”

On the economic outlook:

“The prospects for the economy are somewhat better they
have been recently.”

On using forward guidance as a potential policy tool:

“Forward guidance, particularly if it’s associated with
thresholds, in the British context, does have problems.”

“Suppose we had a year ago set a policy with forward
guidance and thresholds and set the threshold at 2.5 percent. We
would now find ourselves either saying ‘We’ve changed our
minds,’ which would be a problem, or we’d find ourselves having
to tighten policy at a time when, as it’s turned out, no one on
the committee has been voting for that.”

“As the last year has demonstrated -- the combination of
higher than we expected inflation and continuing weak growth --
circumstances can arise... where it would actually make
subsequent policymaking harder rather than easier. You could say
we could set a higher threshold, but the committee would need to
take into account that that might lead people to think we’re
less concerned about inflation.”

On the changes to the BOE remit:

“Generally, there’s been an understanding that monetary
policy means more than just interest-rate setting. In some
sense, this takes us back to the 1960s and 1970s when there were
all kinds of things that were monetary policy like direct credit
controls. Monetary policy is now more than rates and the letter
was recognition of that.”

On the exit of quantitative easing:

“At a time when the economic situation has improved and
interest rates have returned to something more normal, then what
we will see is that central banks -- the Bank of England and
others -- will announce a gradual program of selling off their
assets. That will be going on in the background. With that going
on in the background, monetary policy decisions will be made by
varying the interest rate once again.”